Investing.com — UBS says investors should look past this week’s headlines after Bloomberg reported that the Pentagon has concluded Alibaba, Baidu, and BYD should be added to its Section 1260H list.
The list identifies companies that the U.S. deems to be supporting the Chinese military while operating in the country.
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In a note headed by Mark Haefele, the bank’s global wealth management chief investment officer, UBS notes that Hong Kong-listed shares fell 1.4% to 2.7% following the report, “moderately underperforming the Hang Seng Tech index.”
But UBS stresses that the report “remains unconfirmed,” and company responses have pushed back.
Alibaba said there is “no basis” for its inclusion and that its business is “unrelated to US military procurement.”
UBS argues that while such headlines “can spark volatility or grab media attention,” investors should “not let it distract from the China tech sector’s resilient fundamentals and the ongoing improvement in its policy setting.”
Analysts highlight that China’s AI firms “continue to advance in AI innovation and monetization,” with AI capex up 57% year over year. China’s AI spending over 2023-25 is only “around 18% of US spending,” which UBS says leaves “ample room for growth and catch-up.”
Diplomatic momentum is also improving. UBS points out that the alleged Pentagon letter “pre-dates the recent Trump-Xi trade truce,” and that the U.S. Treasury Secretary has suggested Trump could meet Xi “up to four times in 2026.”
The White House, UBS says, appears focused on “maintaining stability and avoiding escalation.”
UBS concludes that China tech “remains one of our highest conviction equity ideas globally” and that the recent correction offers “a compelling entry point” for under-allocated investors.
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